Applications for the Covid Wage subsidies closed in early December 2021. From February 2022, the government introduced a "Covid Support Payment". This is treated differently to the wage subsidy, and is the subject of a separate article.
Covid Wage Subsidy
The wage subsidy isn't actually taxable, but wages paid using the subsidy aren't technically tax-deductible. This can get quite messy when trying to work out which component of wages is from the wage subsidy, so there are two common accounting treatements - both are correct.
1. The employer records it as a new Other Income code in Xero called Wage Subsidy. The money coming in should be reconciled to this code and will be included in taxable income. The wage expense associated with it can be claimed as a tax deduction*.
2. Alternatively, the money can be recorded against the wages code. The financial statements will show a lower wage figure than in (1) above, but will also show no wage subsidy income*.
Choose one of the two options - whichever suits you the best.
You don't need to claim GST on the wage subsidy income.
* In both instances, your Beany accountant can easily make any adjustment if we prepare your GST returns, and/or when preparing your year-end financial statements.